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Cash Demand in Canada and Sweden: What’s the Difference?

Categories : Cash enables an immediate transfer of value
August 29, 2019
Tags : Canada, Cash, Demand, Sweden
Canada and Sweden have both experienced a decline in transactional demand for cash. While Sweden has seen an overall decline in cash in circulation in relation to GDP over the past decade, Canada’s demand, on the contrary, has been stable. This discussion paper, released by the Bank of Canada, compares the evolution in both countries.
Communication Team / Equipo de Comunicación

This post is also available in: Spanish

The use of cash as a payment instrument has been experiencing a steady decrease in some countries such as Sweden, while Canadians have also been enthusiastic about adopting new payment technologies. The Bank of Canada recently published a discussion paper, A Tale of Two Countries: Cash Demand in Canada and Sweden, which studies the use and the demand for cash.

First, let’s have a look at why Canada and Sweden were used as the point of comparison. Although thousands of miles apart, these countries are similar in more ways than one would think:

Throughout the paper’s in-depth analysis, researchers Walter Engert, Ben Fung and Björn Segendorf  explain the differences between each country’s transactional demand for cash (for payments) and the store-of-value demand (for times of economic uncertainty and negative interest rates) that portray interesting results:


Both Canada and Sweden have experienced a long-term decline in the demand for small-denomination notes, as illustrated in charts 5a and 5b above, reflecting declining transactional demand for cash in both countries.  This evolution is related to both consumer behaviour as well as merchant policies towards both cash and non-cash payments. However, in Canada, demand for large-denomination notes has continued to grow while this has not been the case in Sweden.

It is worth noting, nonetheless, that the situation has evolved recently in Sweden, as

The paper points to three broad lessons:

  1. Policy interventions and bank resolution frameworks (such as “) that protect depositors during a financial crisis reduce the incentive to hold larger bank notes as a hedge against crises.
  2. Cashless bank branches can inhibit access to cash particularly when ATM networks are unable to satisfy consumer demand for banknotes across a range of denominations.
  3. Legal tender rules that declare old banknote series invalid can inhibit the demand for cash.


Read the full report here:

A Tale of Two Countries: Cash Demand in Canada and Sweden

This post is also available in: Spanish